How the Diamond Industry Passed Up a Huge Opportunity

October 18, 2012byRob Bates

The unveiling of the new diamond sourcing protocol by U.S. diamond and jewelry organizations, meant to give jewelers a way to avoid diamonds from certain sources, has caused predictable reactions from predictable corners. The final release from the World Diamond Congress in Mumbai expressed “grave concerns,” with one speaker declaring it should be “buried.”

But don’t write those obituaries just yet. All it takes is one big retailer to adopt this protocol—and some were involved in its drafting—for it to have a huge impact. Jewelers of America COO Rob Headley told me some retailers have already expressed a desire to use it.

What critics of these ideas all too often ignore is that there is a real need for them. Just about all diamonds from the Marange region of Zimbabwe are under sanctions in the U.S. and European Union. That means they are illegal in this country. You may not like that law, and readers are free to register their opposition to it here and here. But corporations cannot disregard the law without consequences.

Companies who operate in America have the right—you might even say they have the responsibility—to make sure they are not carrying sanctioned diamonds in their stores. Moreover, they also have the right—again, you could term it a responsibility—to ensure they are not carrying diamonds that were extracted under violent conditions. (As we know, the Kimberley Process currently doesn’t provide a way to screen out those diamonds. And it probably won’t for some time—if ever.)

If you are a U.S. public jewelry company, and you have just been through the nightmare of trying to comply with Dodd-Frank Section 1502, wouldn’t you start looking at the sourcing of every material, including diamonds—especially with your own government prodding you to do so? (Leading retailers met with the State Department a few weeks ago.) You’d be crazy not to.

Indeed, for all the talk that this protocol will cause havoc in the industry, the fact is, many U.S. companies already ask for these assurances. Specifically, many big retailers now require their suppliers not to sell them stones from Marange. All this new system is attempting to do is standardize this process, and give it more teeth. As the DMIA’s Ronald Friedman puts it: “This protocol doesn’t represent anything out of the ordinary from what we are already doing.” Needless to say, these requests haven’t caused chaos. The companies asking for these assurances are considered among our industry’s best-run and most successful.

And yes, this new protocol, particularly the auditing aspect, could cost a little money. But so does sending a stone out for a lab report. That provides extra confidence for buyers. So will this. And if a jeweler is asking vendors for compliance with this system, it’s not out of the question for the retailer to swallow most, even all, of the cost.

Headley stressed to me that the protocol is purely voluntary, can be modified, and isn’t expected to be complied with overnight. If certain industry leaders and commentators have ideas to improve it, they should offer them. But they need to be part of the solution, instead of thinking they can make this problem magically disappear.

Now, I know many in Mumbai felt this protocol was “sprung” on them, and were upset they weren’t consulted ahead of time. That’s understandable. But the documents are now out there, and it’s time for everyone to offer constructive input. This issue is too important, and potential effects of this too far-reaching, for things to get bogged down in a snit over when people should have been consulted.

We should all be proud of what’s been accomplished with the Kimberley Process. But that doesn’t mean the industry doesn’t still have issues, or gets to spend the next 10 years congratulating itself.

It’s no great accomplishment getting people, especially in this industry, to oppose a change. In fact, it’s quite easy. The real feat lies in creating something effective and workable. Our industry’s leaders have just been handed a golden opportunity to offer feedback on a program that will affect their livelihood. If they decline that chance, if they try to just bury this thing, I fear they will prove their worst critics correct: The business will not change unless it faces 1) an NGO campaign, like the one that led to the Kimberley Process; or 2) a law governing its conduct, such as Dodd-Frank being expanded for diamonds. I don’t favor either happening. But if this new protocol is left to languish the way past initiatives have, we are giving those who want to reform trade practices no other option. So let’s get it together, and work on this. Otherwise, remember: We have been warned.